Circular No. 05/2006/TT-BTC guiding natural resource tax on natural water used for hydropower production

CIRCULAR

Guidelines on Resource Tax for Natural Water Used to Produce Hydroelectric Power

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Pursuant to the amended Natural Resources Tax Ordinance issued by the Standing Committee of the National Assembly on April 16, 1998;

Pursuant to Decree No. 68/1998/NĐ-CP dated September 3, 1998 of the Government detailing the implementation of the amended Natural Resources Tax Ordinance;

Pursuant to Decree No. 77/2003/NĐ-CP dated July 1, 2003 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

To align with the new organizational structure of the electricity sector, the Vietnam Electricity Development Strategy until 2010, and to facilitate the calculation, declaration, and payment of resource tax for natural water used to produce hydroelectric power; to implement administrative reform in tax procedures, the Ministry of Finance hereby provides guidelines on calculating and declaring the payment of resource tax for natural water used to produce hydroelectric power as follows:

I. SUBJECTS AND SCOPE OF APPLICATION

Hydroelectric power production facilities that use natural water to produce hydroelectric power shall declare and pay resource tax on water according to the guidelines set forth in this Circular.

II. BASIS FOR CALCULATING TAX AND DECLARING PAYMENT OF RESOURCE TAX ON NATURAL WATER USED TO PRODUCE ELECTRICITY

1. Basis for calculating tax: The basis for calculating resource tax on natural water used to produce hydroelectric power during a period is the commercial hydroelectric power revenue and the tax rate. The method for determining commercial hydroelectric power revenue is as follows:

Hydroelectric power output is the amount of electricity sold by the production facility to the buyer, determined based on the meter reading at the point of delivery, confirmed by both the buyer and seller.

The resource tax rate on natural water used to produce hydroelectric power is 2%.

The taxable value of water resources per 1 kWh of hydroelectric power is fixed at 700 VND.  Resource tax on water used to produce hydroelectric power

a. Monthly declaration of resource tax:

Each month, hydroelectric power production facilities must declare resource tax using Form 01/TNg issued along with this Circular. In cases where no resource tax is generated in a given month, the production facility still needs to declare and submit the form to the tax authority for record.

Production facilities must fully complete all fields on the declaration form (tax code, name, address, location of resource extraction, etc.) and provide additional relevant information related to the tax declaration. At the same time, they must confirm the legal validity of the declaration by signing and stamping it. If the production facility fails to complete the declaration form in accordance with the prescribed format or does not confirm its legal validity, it will be considered as not having submitted the declaration form to the tax authority.

Based on the monthly hydroelectric power output and the fixed taxable value of 700 VND per 1 kWh, the production facility calculates and submits the monthly resource tax declaration form to the tax authority where the plant is located.

The deadline for submitting the monthly resource tax declaration form to the tax authority is no later than the 25th day of the following month. The form can be submitted via postal service or directly to the tax authority. The submission date is considered to be the postmark date (for submissions via postal service) or the date the production facility submits the form to the tax authority (for direct submissions).

 The production facility bears full responsibility under the law for the accuracy and truthfulness of the resource tax declaration on natural water used to produce hydroelectric power and retains all supporting documents verifying the declared tax.

b. Preparation of self-settlement declaration for resource tax:

Production facilities must prepare a self-settlement declaration for resource tax using Form 02/TNg issued along with this Circular.

The preparation and submission of the self-settlement declaration for resource tax on hydroelectric power production must be completed within 60 days from the end of the calendar year or fiscal year to determine the actual resource tax generated in the year, the amount still due, the excess paid, or the amount exempted or reduced (if applicable).

In cases of merger, consolidation, division, dissolution, bankruptcy, ownership transfer; transfer, sale, lease, or assignment of state-owned enterprises or business establishments, the production facility must prepare and submit the self-settlement declaration for resource tax to the tax authority within 45 days from the end of the exploitation contract or the decision of the competent authority regarding merger, consolidation, division, dissolution, bankruptcy, ownership transfer, transfer, sale, lease, or assignment.

For production facilities whose headquarters are in one locality but whose resource tax revenue is allocated to other localities as specified by the Ministry of Finance, the tax authority managing the production facility is responsible for sending copies of the tax declaration and the self-settlement declaration for resource tax to the relevant tax authorities entitled to the resource tax revenue.

ofd. Payment of Resource Tax:

Each month, production facilities must pay the resource tax into the State Budget based on the declared amount. The deadline for paying the resource tax is no later than the 25th day of the following month after the tax liability arises. In cases where there is a need to pay additional resource tax based on the self-settlement declaration for resource tax, the production facility must pay the outstanding tax into the State Budget no later than 60 days from the end of the calendar year or fiscal year.

In cases of merger, consolidation, division, dissolution, bankruptcy, ownership transfer; transfer, sale, lease, or assignment of state-owned enterprises, the production facility must settle any outstanding resource tax within 45 days from the end of the exploitation contract or the decision of the competent authority regarding merger, consolidation, division, dissolution, bankruptcy, ownership transfer, transfer, sale, lease, or assignment. After the tax authority reviews the self-settlement declaration for resource tax and determines any overpaid tax, it will be offset against the tax payable in the next period; if the business establishment goes bankrupt, dissolves, or ceases operations, the tax authority will refund the overpaid tax according to current regulations.

In cases of merger, consolidation, division, dissolution, bankruptcy, change of ownership; transfer, sale, lease, or assignment of state-owned enterprises, hydropower production facilities must pay the outstanding mineral resource tax within forty-five days from the date of termination of the exploitation contract, or the date of the competent authority's decision on merger, consolidation, division, dissolution, bankruptcy, change of ownership, transfer, sale, lease, or assignment. After the tax authority reviews the self-settlement declaration for mineral resource tax and determines the excess tax paid, such excess will be offset against the tax due for the next period; if the business entity goes bankrupt, dissolves, or ceases operations, the tax authority shall refund the excess tax according to current regulations.

The hydropower production facility shall pay tax by bank transfer through a bank or other credit institution, and the date of tax payment to the State Budget shall be determined as the date when the bank or other credit institution deducts and transfers the tax amount to the Treasury according to the tax payment document to the State Budget issued by the business entity; for business entities paying tax in cash, the date of tax payment to the State Budget shall be determined as the date recorded on the tax payment receipt by the tax collection agency or the Treasury (in cases where taxes are collected through the Treasury).

The hydropower production facility must fully record all relevant indicators on the tax payment document in accordance with the guidelines of the tax authority and the state treasury agency. The hydropower production facility  must clearly indicate on the tax payment document the amount of tax and late payment penalties for each tax period. In cases where a business entity has both tax and late payment penalties due for the current period and outstanding tax and late payment penalties from previous periods without specifying which tax period they are being paid for, the tax authority will first deduct the outstanding tax and late payment penalties before deducting the current period's tax and late payment penalties.

The National Treasury at the location where the hydropower production facility pays the mineral resource tax shall be responsible for allocating the water resource mineral resource tax paid by hydropower production facilities according to the percentage ratio prescribed by the Ministry of Finance for the localities entitled to benefit.

III. IMPLEMENTATION

1. This Circular shall take effect fifteen days from the date of publication in the Official Gazette.

2. Any guidance on the basis for calculating tax, declaration, and payment of mineral resources tax by hydropower production facilities that contradicts this Circular shall be abolished.

As for the contents regarding tax exemptions and reductions, violation handling and rewards - complaints and statute of limitations, they shall continue to be implemented in accordance with Circular No. 153/1998/TT-BTC dated November 26, 1998, of the Ministry of Finance guiding the implementation of Decree No. 68/1998/NĐ-CP dated September 3, 1998, of the Government detailing the implementation of the Mineral Resources Tax Ordinance (amended).

During the implementation process, if there are any difficulties, it is requested that localities and units promptly report them to the Ministry of Finance for study and resolution./.